Advanced Micro Devices Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Toshiya Hari - Goldman Sachs Group, Inc. - Analyst : Hi, good afternoon. Thank you so much for taking the question. My first one is on the data center GPU business. Lisa, you took up your '24 outlook by $500 million. Curious what drove the change there? And more importantly, as you look forward into calendar '25, I doubt you're going to give us quantitative guidance on this call. But conceptually, how are you thinking about growth in your Instinct between your large cloud customers REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 9:00PM, AMD.OQ - Q3 2024 Advanced Micro Devices Inc Earnings Call and your enterprise customers? And if you can speak to the possibility of adding new customers within cloud, again, specific to Instinct, that would be really helpful.

Question: Toshiya Hari - Goldman Sachs Group, Inc. - Analyst : Great. And then a quick follow-up, maybe one for Jean on gross margin. You're guiding Q4 gross margin essentially flat sequentially, if you can walk through the puts and takes there, that would be really helpful. And then again, as you look forward into '25, you're kind of speaking to continued data center growth. One would think the embedded business hopefully begins to recover. And then within some of your businesses like server CPU, I would expect enterprise to grow perhaps faster off a low base. So I do think you have a lot going for you from a gross margin standpoint. But are those points valid? And what should we be thinking about in terms of potential headwinds as well?

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yeah, thanks for taking the question. I'll do two as well. I guess maybe building on the latter point that you just made, I'm curious of how you would characterize your supply chain having evolved now talking about $5 billion-plus. How do we think about what you've been doing on the supply side, given the lead times, the production cycles of these MI300 and 325 GPUs as we look out into 2025. And I have another question. .

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yeah. And then as a quick follow-up, when I look at the sequential guidance in revenue at the midpoint, let's call it about $680 million up sequentially. Could you help us frame how much of that is driven by client versus the data center piece of the business?

Question: Ross Seymore - Deutsche Bank Securities, Inc - Analyst : Hi guys. Thanks for, let me ask a question. Lisa, congrats on the 10-year anniversary. Jean, when you gave the segment guidance kind of playing off the last question, you didn't mention embedded as being up. And then, Lisa, you just talked about it being up left. Just curious, I know it's kind of a muted recovery. But what's happening in the embedded business implied in your fourth quarter guidance? And how are you thinking about 2025 just directionally? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 9:00PM, AMD.OQ - Q3 2024 Advanced Micro Devices Inc Earnings Call

Question: Ross Seymore - Deutsche Bank Securities, Inc - Analyst : Great. And I guess for my follow-up, just on the EPYC business. You've done incredibly well there, Lisa. Have you seen any kind of loosening up of the crowding out effect with the -- well, in your case, the Instinct side taking demand away from the EPYC side. It doesn't seem to have slowed you down much this year. You're still up by my math, maybe 33% or so. And how are you thinking about that kind of CPU versus GPU dynamic from a customer spend perspective as we look into '25?

Question: Ben Reitzes - Melius Research - Analyst : Yeah. If I could stick to the pattern of two. I want to follow up a little bit on servers and thanks for the question. Going to next year, it seems like you're poised for more share gains. And I was just wondering there is a perception that GPUs are cannibalizing the servers. But what are you seeing specifically in Turin? Is it -- with this momentum that you're talking about, is it the right CPU for a GPU are hyperscalers in particular liking the fact you can consolidate and create more room for AI gear. What is the particular catalyst that you're seeing out there with this upgrade? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 9:00PM, AMD.OQ - Q3 2024 Advanced Micro Devices Inc Earnings Call

Question: Ben Reitzes - Melius Research - Analyst : Okay. And then I just want to follow up on the PC market. There's -- just you guys keep outperforming, but there's just general concerns that -- of consumer weakness. And I was just wondering what you're seeing in the 4Q and is there a risk of more than seasonal decline in the 1Q? Or do you feel like things will keep going unabated in the PC market for you guys, particularly?

Question: Joshua Buchalter - TD Cowen, Research Division - Analyst : Hey guys, thanks for taking my question. I'll keep it to one since I'm new here. On the data center GPU side, I realize everyone wants new customer announcements and 2025 guidance, but we're not going to get that, certainly not today. That maybe you could speak to how much of a runway you think exists at existing customers? And how much of a catalyst MI325X on CDNA3 and then MI355 on the new architecture can be to growing revenue and workload breadth internally and externally at these existing customers as we think about growth into next year at the data center GPU side? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 9:00PM, AMD.OQ - Q3 2024 Advanced Micro Devices Inc Earnings Call

Question: Joshua Buchalter - TD Cowen, Research Division - Analyst : Thank you and congrats on amazing decade at AMD.

Question: Timothy Arcuri - UBS Investment Bank - Analyst : Hi, thanks. I had a quick one and then a more intensive question. So the first one is I wanted to ask about the September actuals for data center GPU. It seems like it was in the $1.5 billion range. And that would put December in kind of the $2 billion range. Is that about right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 9:00PM, AMD.OQ - Q3 2024 Advanced Micro Devices Inc Earnings Call

Question: Timothy Arcuri - UBS Investment Bank - Analyst : Great. And then just kind of more broadly on the shape of next year. I mean you see that the market with these big customers, how do you see the shape of revenue off of that CQ4 number? Can you continue to grow off that level? Or do you see some risk maybe of a pause next year? And I ask because MI355 is dropping into the existing infrastructure, and I think you did say you'll have a liquid cooled option, but you do hear about some customers wanting rack scale. So I wonder if you worry a bit about there could be a pause before you get to rack scale in 2026. Thanks.

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Thank you. I wonder if you could talk about the $5 billion of AI revenue, how that breaks down between training and inference, if you're able to assess that and just I know you sort of started off with most of the traction in inference, but you've seen some traction on the training side. Can you just talk about what that split looks like going forward as well?

Question: Vivek Arya - BofA Securities - Analyst : Thanks for taking my questions. I had two. So Lisa, for the first one, how do you address this investor argument that MI is off to a great start, but spec-wise, remains kind of one year behind the industry leader, right? You're shipping something comparable to Hopper while they are starting to ship Blackwell next year. When you are at MI350, they will be on Blackwell Ultra or Rubin. So how do you see AMD closing that gap? And can you really gain share until that gap is closed?

Question: Vivek Arya - BofA Securities - Analyst : And for my follow-up, Lisa, back to the question on the PC market. So it was up -- or the client was up 26% sequentially. I think you are guiding to some growth in Q4 as well. How do you see the state of the channel? And I ask that just because sell-through in Q3 was not that great. And I think Intel had guided down their Q3 to be flat or down. So just how much of the growth that you are seeing is because of ASPs? How much of this is units? And as you look out to 2025, do you think the ASP strength that we have seen this year, can that mix benefit continue for you in '25 also?

Question: Harlan Sur - JPMorgan Chase & Co - Analyst : Good afternoon. Thanks for taking my question. Lisa, on your core EPYC business, you did start to see recovery in enterprise last quarter. It was broad-based across many verticals. You've got -- you've also got a growing share dynamic as well, right? And it sounds like that trend continued in the September quarter. Do you anticipate continued follow-through in terms of quarter-on-quarter growth this quarter for enterprise? And then maybe what sort of enterprise and general cloud demand trends are you seeing out of China?

Question: Stacy Rasgon - Bernstein Research - Analyst : But the first one, I wanted to go back to what you said about the size of the data center GPUs in the quarter. You said it was approaching the size of Your compute business which you put around what under $1.7 billion, maybe a little more. Is that right? And like if that is right, it implies that at $5 billion for the year, you'd actually be down in Q4. So I'd probably got to be $5.2 billion or $5.3 billion for the full year, just to be flat sequentially and more than that to get growth. So I guess the question is number one, is that the size of the business that you're talking about in Q3? And is that the kind of level of growth you're thinking into Q4? Like how should we think about that?

Question: Stacy Rasgon - Bernstein Research - Analyst : Okay. For my follow-up, you talked a little bit about lumpiness next year, is there any kind of seasonality or something that I to be thinking about specifically into Q1 for data center GPU? I know you have like the MI300, I guess, ramping into production at that point. But should I be thinking about a seasonal -- like seasonality into Q1 given the general statement on lumpiness?

Question: Harsh V. Kumar - Piper Sandler & Co. - Analyst : Yeah. Hey Lisa, first of all, congratulations on your 10-year anniversary. I just looked at the 10-year chart, the stock is around $3, so a heck of a job here. And also congratulations on $5 billion in Instinct revenues. So I wanted to ask the first question. This is one we get from investors all the time. In the coming year, let's say, 2025, your key competitor will take most of the TAM of the AI market, the GPU market, rough count, they'll take in something like $50 billion, $60 billion, you'll get another $5 billion to $10 billion, call it. So the question is, what do you think is the major hindrance? You've got chip level compatibility. So does it boil down to the fact that you're just earlier in the game. You've been doing this just 12-months in a serious manner? Or is there still a rack level of disparity? If you could just help us think about what the hindrances are to you becoming a major player here.

Question: Harsh V. Kumar - Piper Sandler & Co. - Analyst : Very helpful. Lisa, from a follow-up, and maybe Jean can help out here. It's kind of well understood that your gross margin for MI300, MI325 will be below corporate margins. Could you help us maybe think of some framework on how those gross margins for Instinct might get to parity with your corporate business? I know you probably won't give us a revenue level or a time frame, but maybe you could help us frame in some manner that we could try and understand it.

Question: Thomas O'Malley - Barclays Bank PLC - Analyst : Hey guys, thanks for letting me on. Lisa, I just wanted to ask on mix the MI300 platform into Q4. Obviously, you're launching the MI325 series. Should you say -- should we expect a significant contribution the new product in Q4? Or is this a situation in which it's launching late year and most of the impact is into Q1? I guess that's the first one. And then the second one is just if you look into next year, could you talk about where the end markets are and embedded for Xilinx? You gave some color on comm and a little of industrial there. But just where we're at in terms of starting kind of Q4 and into Q1. Are there any that are outperforming, underperforming? Any color there would be helpful. Thanks for seeking me out.